Free Cash Flow
The financial statements for Nike, Inc., are provided in attched file
a Determine the free cash flow for the most recent fiscal year. Assume that 90% of the additions to property, plant, and equipment were used to maintain productive capacity. Round to the nearest thousand dollars.
$ (in millions)
b. How might a lender use free cash flow to determine whether or not to give Nike, Inc., a loan?
Free cash flow is often used to measure the financial strength of a business. The free cash flow that a business has, the easier it will be for the company to pay the interest on the loan and repay the loan principal.
c. Would you feel comfortable giving Nike a loan, based on the free cash flow calculated in (a)?
. Nike’s free cash flow is extremely and is well in excess of the capital expenditures necessary to maintain capacity